Its the VAT in the fuel element of the 45p/25p per mile. Fuel element is circa 14p per mile, VAT is therefore 2.33p per mile claimed.

A large organisation may be paying out for hundreds of thousands/millions of miles per year so it can be a significant amount.

"I'm told its to do with the employer claiming the VAT from the fuel element of the mileage payment."

That's what a colleague told my son, but I can't see how it works. Say you do 1000 miles and claim £450. Fuel at £6 per gallon and 50mpg is £120, which is £100 plus £20 VAT. So the employer can reclaim £20 VAT? But you are very unlikely to present a receipt for £120 of fuel. More likely it will be several receipts where you bought fuel over the month and not all used for business purposes.

Given how I did a mix of business and private miles, cant see how that would work accurately. Not all fuel I bought was used on company business, sometimes I'd use 2/3 of a tank, rest was family stuff.

I've done a bit of digging on the HMRC web pages and found this. Like most things tax, it's not straightforward, but it appears to confirm what you say Archie.

"If employees are reimbursed for road fuel they have bought for business purposes the VAT charged can be treated as input tax. This can only be done if the business can show that the employee has been reimbursed either:

• for their actual expenditure; or
• by way of a mileage allowance.

The business must also obtain and retain invoices for all fuel purchased by its employees. This means either full VAT invoices or less detailed invoices. Input tax can only be claimed on the cost of fuel for business use in making taxable supplies so any invoices need only cover this amount.

HMRC accepts that the amount of the invoice in many cases will not match the input tax claim in respect of business fuel in any one claim period, particularly where fuel is purchased towards the end of the period.

Clearly a claim cannot be supported by a VAT invoice that is dated after the dates covered by the claim. This means, in practice, that it may be advisable for employers to arrange for their employees who use, or may use, their cars for business purposes to retain all fuel invoices. This will ensure that, at the end of the claim period the value of business fuel is covered by an invoice."

I've had to provide receipts covering the period of the mileage claim for many years.

I'm told its to do with the employer claiming the VAT from the fuel element of the mileage payment.

That's correct. It is just needed to show that you did pay some VAT on the fuel. We have to do the same. It doesn't have to be a receipt from the day of the trip, can be the last or next time you fill up, and ideally (I think, an expert might say otherwise) cover at least the amount of VAT which your company will be reclaiming. The company accountants need to be able to see the VAT details on the receipt. It's why I never "pay at the pump" if I am likely to be submitting an expense claim, to ensure I get a VAT receipt.

I use the BPme app to pay at pump & they email me the VAT receipt. My employer uses an online expense system & I just attach the emailed invoice to any mileage claim.

Other fuel apps are available - don't know if they email invoices.

Edited by Mike Lyons on 18/08/2021 at 20:35